Luke Bailey

I agree with Ms. Jensen. You see prime + 1% all the time and I know of no case or FSA or anything else that has ever challenged. Prime without 1% is what a bank in theory would use for its most credit-worthy customers. Given the relative security of a loan secured by the participant's own account balance and the low costs of foreclosure, how is the participant not a prime risk? Arguably, holding the rate steady for a quarter is more questionable if interest rates volatile to high side. Maybe say it's held steady for quarter, but subject to change if the plan administrator determines sufficient movement in interest rates to warrant.

Sure. 409A limits your separation events. You can always limit them further. You can say that transfer between semi-related companies is not a separation, just like you can not include change in control as a distribution event.

If it is a governmental plan under 414(d), 401(a)(4) and all regs under it do not apply. See IRC sec. 401(a)(5)(G). Ditto for 411(d)(6). See flush language of 401(a) immediately following 401(a)(37). Whatever constrains them is going to be state law and the "definitely determinable benefit" rule of 1.401-1, and pre-ERISA vesting requirements.

The IRS does not have a determination letter program for 403(b)'s.

I don't think you can amend in 2018 for 2017 outside of VCP. I suggest you amend for 2018 and forward (or, alternatively, don't amend and wait to contribute matching until after the end of the year), and for 2017 use self-correction under EPCRS and tell the individual in question that he/she got an excess distribution that (a) is not eligible for rollover, and (b) should be returned. But say it in a nice way. It should be OK if he/she doesn't actually return the money, because IRS would likely accept the argument that it was not worth tracking down and threatening to sue the person to get it back.

I'm confused. A QSEHRA can only be maintained by an employer that has no other health plan. So if this this employer "offers group health insurance," it can't have a QSEHRA. If what you are asking is whether an employer who has a health plan and thus does not qualify to have a QSEHRA can have a QSEHRA only for Medicare-eligible employees, I don't think so.

UR welcome, Kac1214.

TheoDawg, your answer can be inferred from 1.401(m)-2(b)(2)(iv)(E). It's a little confusing because it refers back to 1.401(k)-2(b)(2)(iv) and says that you have to use the methods of determining income there, but they seem identical to me. But what does seem clear from this reg is that to the extent the recharacterized deferral sticks as after-tax, you would not distribute earnings, and vice versa.

OK. I assume that the owner is 2% or > of the population of old plan. Under 1.401(k)-1(d)(4)(I), CG is determined at date of sale, and the "other business" may have been in a CG. Arguably, a new business that did not exist on the date of sale would not be in the CG, but this gets really complicated and substance over form issues may intrude.

What is the "successor plan" issue, that they want two 415 limits in a single year?

He/she was employed "on the last day of the plan year." I don't see how you can interpret that to be "all day on the last day of the plan year."

You mean they never had a plan and now want to establish one for the consultancy?

Just guessing, but for some reason the plaintiff must not have had a good remedy under state law against the family trust. If that were the case, I don't see how the ESOP administrator would have been the appropriate person to help her.

I think your thoughts are correct. You need to get them on the same year. I don't see how else it could work. The 125 regs have some verbiage in them that seeks to limit plan year changes, but the point of that is to not use plan year changes as a way around the annual lock-in. You need to read them, but hopefully would not prevent you from doing what you need to.

I worked on a case somewhat similar to this years ago. In that case, the participant had dissipated the funds within a matter of 24 hours, so understandably the surviving spouse was looking to the plan and alleging breach of fiduciary duty, etc. In this case, Wengert, it can be inferred that the family trust to which the ESOP wired the funds gives the surviving spouse a reduced or no benefit. My guess is that the funds in the family trust, once out of the ESOP, would come under the jurisdiction of state law to sort out. Arguably the ERISA result, here, is a good one. A state court may have authority to determine the surviving spouse's rights, if any, to all or a portion of the distribution and will be able to base its decision on a variety of factors (e.g., length of marriage, identities of beneficiaries of family trust) than would the federal court applying ERISA and the terms of the plan document.

ERISAAPPLE, the law is clear at this point that the plan's literal provisions prevail and, absent a disclaimer, prevail over any claims that might otherwise arise under state law. The "spouse" has benefits under the plan/ERISA as such and this defeats marital property or other state-law-based property rights in family members. See, e.g., the 2009 U.S. Supreme Court case of Kennedy v. Plan Administrator for the DuPont Savings & Investment Plan, No. 07-636.

I understood that the question was that the new spouse is the beneficiary under the plan, but may be willing to bow out to let the decedent's children take, since they were likely intended. The way a disclaimer works, the person who would take disclaims, and then whoever would take after that person takes. The disclaimer cannot identify the person to whom the property goes (would be making a taxable gift), but can simply take him/herself out of equation in favor of person who would otherwise take under the instrument (plan or beneficiary designation).

Mike, not by the IRS, but I think in part that's because the rule is generally enough known that the plans that would be targeted by IRS for audit on the issue (e.g., plans of larger professional firms) apply the rule conservatively themselves, although as in most things there are gray areas.

If there is much money involved, you may want to research. Logic would tell you it is just the exchange price, since the PS 58 (actually, Table 1, now) costs were for a noncapital asset, i.e. the transient life insurance benefit. However, when I last looked at this (20+ years ago), it seemed that the rules gave you basis for (what were then) PS 58 costs.

I appreciate all the input, which are consistent with what I thought was probably accepted practice. Seems correct to me, although odd that there is no guidance from IRS really on the issues, other than some inferences that can be drawn from subregulatory guidance, e.g. the FAQ noted by card above. Re the "designated Roth account" concept, it seems to me that it's less an account and more a "tag," since the Roth money in the "designated Roth account" retains the characteristics of the account from which it originated. So if I do an in-plan Roth rollover of amounts from my pre-tax elective deferral account, that money goes into my "designated Roth account," but it retains the distribution rules of its source. Ditto for other source accounts. Or you could look at it the other way around, i.e., all the portions of the designated Roth account are "tagged" with the distribution. Either way, there is in essence an overlap between the designated Roth account and the accounts in which the money originates.

If the HCE in question controlled or had substantial influence over the decision concerning his/her allocation (or, in this case, nonallocation), then the plan may contain a nonqualified CODA that could disqualify it. See Treas. reg. 1.401(k)-1(a)(3) and related guidance.

I think the corrective contributions were a mistake and can be withdrawn from the account and used the same way as forfeitures under the plan.

Some 401(k) plans have many different types of distributions besides lump sum on termination of employment, e.g. hardship, non-hardship in-service after attainment of age 59-1/2, in-service at any age from rollover account, partial distributions after separation from employment, and RMDs. If the plan also has Roth elective deferrals and an in-plan Roth rollover feature, an employee's accounts for elective deferrals, nonelective, matching, and rollover may all contain both Roth and non-Roth accumulations. So when a distribution of less than 100% of any account is made, you have to determine the portion that is Roth, and the portion that is not Roth. The 401(k) LRMs allow a plan to provide that distributions of excess contributions after failure of ADP test are made first from non-Roth amounts, but aside from that, I can find no guidance from IRS regarding what it thinks is permissible and have come to conclusion that it is up to the plan and that the plan can also let the participant decide in his/her distribution request form. E.g., plan document could permit a participant who qualifies for an age 59-1/2 non-hardship in-service distribution, who wants to receive $50k as distribution, and who has $100k of Roth and $100k of non-Roth spread over elective deferral, matching, and nonelective accounts to elect to take the entire $50k from the non-Roth. Also, plan could provide that RMDs always came first from non-Roth until non-Roth exhausted. Anyone else given this some thought or found guidance on the question that I am unaware of? One major vendor has a distribution form that seems to permit what I describe in prior paragraph (i.e., employee choice), but I did not find a supporting provision in its volume submitter.

This is not just an excise tax issue, but also an issue under ERISA of making sure that any losses to the plan that were a consequence of the breach are recovered. The current trustee/fiduciaries has/have a duty to investigate and reach a conclusion as to whether the prior trustee committed a PT, and if they conclude one may have, to confront the prior trustee and demand either an explanation or compensation to the plan. Reporting the PT, or not, and paying excise tax is secondary and will be easier to figure out once you've taken first step of fiduciary investigation. Alternatively, you could call the DOL and ask it to investigate.

Section 404(a)(6) of the Code puts cash and accrual basis taxpayers on a modified cash method of accounting for retirement plan contributions. It is not optional. If the contribution for a tax year of the employer is contributed in that year or after the end of the year by the deadline (generally, the extended due date of the employer's tax return for the year in question), it is deductible in the tax return of the "for" year. So assuming the employer contributes the 2017 amount by its tax return filing deadline (including extensions) for 2017 (I'm assuming the employer's tax year is same as plan year), the deduction has to be taken on 2017 return. If they contribute it later than that (which may be contrary to the plan document or have other legal or federal income tax implications, which could be negative), they would deduct it in the year they actually contribute it. E.g., if their tax return deadline for 2017 was March 15, 2018 and they obtained an extension to September 15, 2018, and make the 2017 contribution on October 1, 2018, the 2017 contribution would be deductible in 2018. If they made the 2018 contribution on or before their 2018 tax return filing deadline, the 2017 and 2018 contributions would both be deducted in 2018.